Bond daddies and real estate speculators are perverting a state law nominally intended to help blighted areas. The effect is to give huge subsidies, courtesy of the entire state, to developers of some of the most valuable land in Arkansas.
It is one more debilitating factor in a state budget that doesn’t yet provide for teacher raises or court-ordered school construction, but which many legislators and the governor say they are anxious to tap for a giant road-building program.
The issue is tax increment financing (TIF) districts. In them, property tax collections are frozen at existing levels and future growth in taxes from new development is diverted as a subsidy to encourage the development, sometimes for infrastructure, sometimes for direct support. Since most property taxes go to public schools, they are the big losers.
The legislation supposedly was written to help blighted areas. But tiny escape clauses open use of the money everywhere.
Truly blighted areas will never be candidates for TIF subsidies. Nobody wants to build there. The bond firms and wealthy real estate barons have figured it out. The first TIF was proposed to improve access to high-dollar retail developments in western Little Rock. Bass Pro Shop, one of the country’s most successful sporting goods retailers, has been offered TIF subsidies to build on the busiest highway in Arkansas. Sherwood wants to rob the Pulaski County School District to further develop a prime arterial street. Fayetteville, a real poverty pocket, has a scheme to redevelop part of downtown with TIF subsidies. Jonesboro, the economic engine of Northeast Arkansas, is going to subsidize a mall being developed by one of its wealthiest citizens. The Jonesboro deal will CREATE blight, by damaging an existing mall. Tiny Johnson, north of Fayetteville, is creating a 184-square-mile TIF district to subsidize land controlled by poultry magnate John Tyson and Little Rock developer John Flake, to the detriment of the Springdale School District.
The most audacious grab is in Rogers. The city is hurriedly finishing a TIF there for a five-mile strip along Interstate 540. It is rushing so as to capture increased property taxes on construction already in progress. It is development provably not happening because of TIF financing, but will benefit anyway from subsidized freeway exits and the like. Rogers is giving corporate welfare to fancy office buildings, Wal-Marts, hotels and restaurants on land going for Gold Rush prices.
The Rogers School District, which had its hand out prominently for a share of the Lake View decision windfall, doesn’t oppose giving up the rising property taxes to subsidize millionaires. Why? Because changes in state school finance law mean that Rogers will get a mandated level of state support — $5,200 per student per year currently — no matter how much local property tax assessed in the name of the school district is diverted to other uses. This means everybody else in the state is subsidizing Rogers for the lost local property tax, from Lake View to Little Rock.
A lawsuit might stop this. Some think it a perversion to interpret the TIF enabling amendment to allow it to nullify older parts of the Constitution that prohibit raids on school taxes for other purposes.
It would be better if the legislature set this right. After all, only a minority of the people legislators represent can capitalize on TIF schemes. The rest pay.